Charting a new way forward through attorney-practitioner partnerships: Part II —Milwaukee
December 15, 2015
This is the second in a two-part series exploring how strong working partnerships between practitioners and attorneys can give rise to innovation in the work to reclaim and revitalize blighted properties. Missed Part I—Syracuse? Click here >>
Let’s give ourselves a little breathing room
In Milwaukee, a productive partnership between Gregg Hagopian, assistant city attorney, and Martha Brown, deputy commissioner of the Department of City Development, has helped change the rules of the game.
The City Attorney is separately elected in Milwaukee, and Hagopian is one of approximately 35 lawyers in the office. The Department of City Development is responsible for housing, economic development, planning, zoning, and redevelopment activity. As part of those responsibilities, it manages and markets tax-foreclosed property. The Department’s current inventory numbers around 1,200 residential and commercial buildings and 3,000 vacant lots, far exceeding what the city handled prior to the Great Recession. In 2015 alone, the Department took in more than 800 improved properties and, as of mid-December, has sold 501 foreclosed properties year to date.
“In Wisconsin, the tax foreclosure law we use essentially makes us a big land banker,” says Hagopian. “When we foreclose we become the fee simple owner of the property. That terminates other interests, including mortgages, leases, and judgment liens. So whatever lease used to exist doesn’t exist, and the city owns really good quality title. But we often don’t know if they’re even occupied or whether the conditions are safe for occupancy or not.”
Hagopian and Brown estimate that about 25-30% of the properties the City receives are, in fact, occupied. Whenever the City received a new batch of tax-foreclosed properties, which happens four or five times a year, it found itself thrust into the role of unwitting landlord – knowing some of the properties have occupants but not necessarily which ones, or even the names of the tenants.
At the same time, those tenants, typically unbeknownst to them, no longer owe rent to their prior landlord and are now living in a city-owned property without a lease. The result is a gray area in which there’s no legal relationship between the occupant and the property owner (the City).
It used to be manageable. Five or ten years ago, the volume of tax-foreclosed properties was small enough that the City could send out inspectors to each property as soon as it was received. With the present flood of properties and no proportional increase in management staff, that’s no longer feasible.
“We notify them that they aren’t to pay rent to their old landlord anymore, but we don’t have the manpower to get out to them immediately,” explains Brown.
What the City needed was a way to create a legal relationship with these occupants while also buying some time. Time to inspect the properties and determine if they’re safe to inhabit. Time to actually identify the occupants of the property and determine if they reliably pay rent, if a new lease is the right option, or if they might even qualify for homeownership.
The solution in Milwaukee, it turns out, is a familiar tool applied in a new way: a license.
“We took a really close look at what the law is, and did this novel approach,” says Hagopian. “We said, ‘Rather than giving you a lease right away and making you our tenant right away, we will give you the personal right to occupy, which is not a real property interest, it’s a contract interest, and it’s called a license.’ You have the right to occupy until we get there to see if the property is safe to occupy and if this is someone that we want to have as a tenant.”
“Now, we have the license that starts immediately, and rent is considered a license fee,” says Brown. It harmonizes landlord-tenant law and the tax-foreclosure law, eliminating the legal gray area associated with acquiring occupied properties.
The license stays in place until city personnel can inspect the property and interview the occupant-licensee. If the property and occupant pass muster, the City and occupant enter into a lease, allowing the occupant to stay – this time as the tenant of the City – and landlord-tenant law kicks in.
The license arrangement provides additional breathing room for the city, keeping parcels occupied until the City decides on whether to extend a lease. Once the City does extend a lease, it also has the opportunity to help some tenant occupants travel down the path to homeownership through a rent-to-own program.
“Increasing homeownership is the goal of the program, providing a path for households that normally have no such path or for whom taking on homeownership could result in financial disaster the first time they encounter a major repair problem,” says Brown.
If the tenants of City-owned, tax-foreclosed properties are interested in owning the house, a homeownership counselor meets with them. If it’s determined to be a good fit, the City enters into an amended lease that’s designed to help the tenant prepare for homeownership. The tenant takes on a wider array of responsibility for the property, including lawn mowing and paying for utilities. They also commit to working with the homeownership counselor for up to two years on tasks such as budgeting and credit clean-up.
“Once the renter has achieved their own [homeownership] goals, then we will sell that property to the tenant for $1,” says Brown. In addition, the city commits to spending up to $20,000 on repairs, like the roof or furnace, to ensure the buyer won’t face big-ticket repairs in the first few years of ownership. The buyer must live in the home for five years. Since the lease-to-own program began in 2014, 17 tenants have closed on the purchase of a City house, and several dozen are on the path to ownership.
In exchange for its investment, the City reaps the benefits of an owner-occupied property that’s been returned to the tax rolls. It avoids what it considers the worst-case scenario: demolition, which costs $13,000-$15,000 and results in an empty lot that’s not generating tax revenue—not to mention the increased emergency response calls and decreased property values associated with vacant properties.
Both the license and the rent-to-own program, according to Brown, couldn’t have happened without Hagopian on board as a partner.
“Gregg is a man of ideas, not just talk,” says Brown. “Candidly, we don’t necessarily see eye to eye at every first conversation on these things. We sometimes are…in a little negotiation period, on both sides of things, but we have found ourselves to be a good team. Both of us are people with pretty strong opinions, but we also like each other.”
She continues, “The important thing is, we partner…we’re a team together, and we strategize together. We bounce ideas off of each other about how to structure and implement and word things.”
Hagopian echoes, “Like any relationship, though, you really need to have both parties talking and working together and sharing ideas and coming to the meeting of the minds. Kind of hard to do it alone; you can’t do it alone!”
A good partnership has trust on both sides
In Syracuse and Milwaukee, strong partnerships between practitioners and attorneys have enabled true innovation in local governance. These working relationships make it possible to adapt to the persistently challenging conditions that have gripped many American cities since 2008.
John Sidd and Katelyn Wright in Syracuse worked together on the Development Enforcement Note and Mortgage, a brand new tool that holds land bank home purchasers accountable within New York State’s new legal framework for land banks. Gregg Hagopian and Martha Brown adapted a familiar tool, a license, in a brand new way to protect both the City and occupants of tax-foreclosed properties, creating the time needed for the City to make smart decisions about these properties and even help some tenants travel down the path to homeownership.
Each of these tools is tailored to the particular legal systems of New York and Wisconsin and may not be viable options in other cities or states—but the potential impact of effective practitioner-attorney partnerships is relevant everywhere.
“A good partnership has trust on both sides: for the policymaker, the deputy mayor, the non-attorney, trust that the attorney ultimately has their back and has the City’s back; for the attorney, trust that the client, the policymaker, can ultimately think for themselves,” says Settlemyer.
“At the end of the day, you want the policymaker to feel empowered to make a decision with the full knowledge of all the risk. That is the result of a good working relationship with the city attorney.”
Back to Part I—Syracuse >>
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